"Self Employed" Definition help!!

[indigogecko]

Hi all,

 

Currently doing battle with an infuriating system of red tape.

 

I've been told by the National Insurance people that I need to register as self-employed if I'm doing jobs for lots of different people hiring me for one-offs. However, I've looked at the definition of Self-Employed and I can't see that what I'm doing realistically comes under that, as I'm being employed each time...

 

The fact I've caused mass confusion by being a UK citizen who didn't automatically get an NI number at 16 and the fact the various employees of HMC&R I've spoken to seem in disagreement over why this is (a$$ from elbow?) only adds to the fun.

 

So my question is, freelancers, I know there's a number of you out there. People who have done casual work for a number of employers, as well as being available for private hire, are you registered self-employed, and if so how do you define your business?

 

Thanks

Gecko

[sonic]

As I understand it, if you are working for yourself... which you technically would be as I doubt these companys would put you through thier payroll... you have to declare your inome and be taxed accordingly.

 

It's really easy to do - you need to know a few things, like how much you expect to earn out of this venture, then you phone a number - which I can find if you need it - and tell them your self employed.

 

Then whenever you invoice a company, keep a copy of that invoice and file it away nice and safe... then at the end of the year you have to submit your tax return - I'm kinda lucky in that, my dad's an accountant - so he does all that bit for me!

 

But to answer your question, the way I see it - if you're earning money, you have to declare it to the inland revenue, and I think to do that you have to either be employed by someone or be self employed.

 

When I next see my father I will ask him what the real answer is and let you know.

 

Also, if you're working for other companys, you might want to look at your public liability insurance... you may not be covered, and may have to get your own.

 

 

Take it easy.

[djw1981]

See also the second half of Lightnix' excellent post here, and in other places - try a search or two. :P

 

This also makes me think that a wiki article or FAQ on being self employed etc would be a good consolidation of the great stuff that Lightnix and others have posted on the many topics on beinga freelancer, pay, tax, NI and PLI.

[indigogecko]

thanks for that link djw - though that brings up a little more confusion. Sort of like saying that for NI purposes I'm employed (do I have to tell them every job I do then? They wanted my employers details...) but for PLI I'm on my own...

 

Gah.

 

Whole system is nuts, if you ask me.

[Guy]

Try http://www.whitelight.ltd.uk/resource/?p=freelance-guide

Good luck

Guy

[Jamtastic3]

Yeah I'm really confused with the whole tax/self employment thing as well.

 

I've signed myself up as self-employed and so far the Inland Rev have only been asking me to pay National Insurance Contributions every month or so which I do. Am I doing the right thing so far? Will they send me a letter saying I have to pay my taxes at the end of the year? Do self-employed people get a tax number as such becuase I don't know if I have one or not? I just know my NI number which they have.

 

My minds boggled now!

[indigogecko]

Thanks Guy, that was far more informative, think a trip to the bank is probably in order ASAP to see if I can talk to a money-person about where I'm going with this. From looking at the few websites linked from freelancers profiles looks like most people have set themselves up as self-employed small businesses.

 

Thanks for the help, feeling much happier with at least having some direction to go next!

 

Cheers

Gecko

[Big Dave]

Yes you are doing the right thing.

 

If you've just signed up as self employed this is what should roughly happen.

 

You should be paying your NI every month.

Your tax office should give you a Unique Tax Reference (UTR), what used to be your schedule D Number. If they don't chase them for it.

Once you have completed your first trading year, you will need to produce a set of accounts (or rather your accountant while - get a good one).

Once you have your completed accounts, you will know your trading profit for the year. You can then file you tax return (or get your accountant to do it).

On the first January 31st following the end of your financial year, you will have to pay your first tax bill which consists of the tax you owe from your first trading year, plus 50% of that amount again on account, plus Class 1 NI payment. This first payment will generally hurt and be relatively large.

On July 31st of that same year, you have to the final 50% on account. Basically, being self employed means you pay you tax in advance based on your previous years earnings.

 

I hope that makes some sort of sense. Best advice I can give is get a good accountant and they will explain it all to you and tell you what you have to do and when.

[charlyfarly]

On the first January 31st following the end of your financial year, you will have to pay your first tax bill which consists of the tax you owe from your first trading year, plus 50% of that amount again on account, plus Class 1 NI payment.

 

Class 1 is for employees. If you are self-employed you pay Class 2 as mentioned before plus Class 4. In 2006-2007 Class 4 contributions are 8% of taxable profits between £5,035 and £33,540 and 1% of profits above that. The Inland Revenue collects it, or HMRC as they like to be called now.

[gareth]

It's quite simple - when you take on a one-off job, do you :

* Have tax and NI deducted at source?

* Get paid according to an hourly rate?

* Expect your employer to provide your tools, PPE, etc.?

* Receive holiday pay?

* Submit a timesheet in order to get paid?

* Not have any responsibility to provide a replacement or deputy if you're taken ill and can't work?

 

If 'yes' to one or more of the above, you're an employee, and not self-employed.

[Pete]

Inland Revenue are slooooooooooooowwwwwwwwww with the UTR's. I have been chasing them for 3 months!

[w/robe]

The first time you do all of this is definitely the worse as you have to set it all up.

 

I would certainly recommend you to get an accountant if you are having concerns over this. Even if after a few years you find that your situation is simple enough to deal with yourself they will have set you on the right track.

 

I'm sure we had a 'recommend your accountant' thread in the past if you search for it.

[charlyfarly]

I agree w/robe! In fact I've been self-employed for about 18 years now and since I earn less than £15,000 a year, the IR now send me their 'shortened Tax Return'. It's much simpler to fill in as long as I don't have any other outside declarations!

[Thirdtap]

'lo

I recently needed a Unique Tax Reference number due to the amount of freelance jobs last year. Filled in the paperwork sent things off then got one letter back, kept phoning IR and they were quite helpful - one company I worked for wouldn't pay unless they had your UTR and so on...

Anyway turns out I had been issued a UTR it was at the top of the letter they sent me labelled tax reference of something else. I know another person who had just become a freelancer had the same thing. Bit annoying that if the number had been pointed out to me I would have said the IR and myself a bit of time and hassle

[paulears]

I can't quite see what the fuss and bother is about. Never write to the revenue to chase up a previous query, they will just pull out your file from where it had got to in the pile, add your note, and then put it back on the top of the pile. So chasing seldom works. They do however, have a nice phone line with quite helpful people who will tell you exactly what to do.

 

The best advice, as mentioned above is get an accountant. If your total of transcations is modest, as when starting out, then their bill won't be astronomic, and most guarantee to save you far more in revenue payments than they charge in fees! Lots love small businesses as they are so simple to do - yet so difficult for us!